EconPapers    
Economics at your fingertips  
 

Financial development and innovation-led growth: Is too much finance better?

Xiaoyang Zhu, Stylianos Asimakopoulos () and Jaebeom Kim

Journal of International Money and Finance, 2020, vol. 100, issue C

Abstract: We show that the expansion of financial sector may hurt innovative activities and hence the innovation-led growth, using data on 50 countries over the 1990–2016 period. Countries with higher level of financial development are found to have a smaller positive or insignificant effect on innovation. The marginal effect of innovation on growth is a decreasing function of financial development. Using a dynamic panel threshold method we re-examine the possible non-linearity between finance, innovation and growth. We find that innovation exhibits an insignificant effect on output growth when credit to the private sector exceeds a threshold level of about 60% as a share of GDP. These results are not driven by banking crises, the long run effect of 2007–2008 financial crisis, or the ongoing European sovereign debt crisis.

Keywords: Financial development; Innovation; Growth; Threshold effect (search for similar items in EconPapers)
JEL-codes: G15 O31 O40 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560618307587
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:100:y:2020:i:c:s0261560618307587

DOI: 10.1016/j.jimonfin.2019.102083

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2020-03-29
Handle: RePEc:eee:jimfin:v:100:y:2020:i:c:s0261560618307587